Landlords, not tenants, must pay rental broker fees: state

Typically NYC tenants pay the broker fees for real estate agents hired to represent the landlord

TRD New York /
Feb.February 05, 2020 11:36 AM
Gov. Andrew Cuomo and Secretary of State Rosana Rosado (Credit: Getty Images)

Gov. Andrew Cuomo and Secretary of State Rosana Rosado (Credit: Getty Images)

The Department of State has intervened in the economics of New York’s rental market.

Landlords must now pay the broker fees for real estate agents they hire to represent their interests, according to new guidance from the DOS.

This is a reversal from the tenant-pays system that is the norm in rental transactions in New York City.

Any real estate agent acting on behalf of a landlord that accepts a broker fee paid by a tenant could be subject to discipline. Agents representing a tenant are not affected by the guidance.

The guidance is dated Jan. 31 and offers the DOS’ interpretation of the rent laws. Though guidance is not legal advice and is subject to change, it has been used since the laws passed in June to clarify implementation, most notably on whether real estate agents must also adhere to a cap on the amount they can charge renters for application fees.

DOS’ interpretation is drawing strong pushback from the industry. The Real Estate Board of New York, which learned about the guidance yesterday, says it’s “exploring legal action” to reverse the interpretation.

In a Wednesday email, the trade organization advised members to call, email the DOS and post their opposition on social media.

“The DOS issued a body blow to thousands of hard working New Yorkers,” Reggie Thomas, REBNY’s senior vice president of government affairs, told The Real Deal. He argued the new cost of landlords paying brokers fees instead of tenants would lead to an increase in rent.

“That [additional cost of broker fees] gets amortized over the course of the entire year,” he explained.

The guidance also notes that the DOS will not penalize managing agents for condo and cooperative boards collecting more than $20 for rental applications. That said, it noted that it would not be taking a position on the legality of the practice.

The broker fee issue is familiar territory for REBNY and the agent community. Last year, New York City Council member Keith Powers introduced a bill that would have capped the amount a tenant can pay towards the broker fee of a landlords’ real estate agent.

“This came out of the blue,” said Thomas. “We’re looking at every single option available to us [to stop the DOS’ interpretation]… There will be no stone unturned.”

Write to Erin Hudson at [email protected]


Related Articles

arrow_forward_ios
155 West 11th Street and 1100 Park Avenue (FXFOWLE; Google Maps)

Manhattan luxury market shows tentative signs of activity

Manhattan luxury market shows tentative signs of activity
Clockwise from bottom left: Robert Reffkin of Compass, John Gomes, Scott Rechler of RXR Realty, Rich Barton of Zillow, Gary Keller of Keller Williams and Don Peebles of The Peebles Corporation (Getty)

“America is in crisis:” Real estate leaders address George Floyd protests

“America is in crisis:” Real estate leaders address George Floyd protests
Assembly Speaker Carl Heastie (Getty)

Assembly speaker fast-tracks rent relief bill

Assembly speaker fast-tracks rent relief bill
New York State lawmakers have approved a moratorium on evictions for the remainder of the Covid-19 emergency. (iStock)

Eviction-ban bill passed by lawmakers as landlords object

Eviction-ban bill passed by lawmakers as landlords object
16 Sutton Place (Credit: Google Maps)

Sutton Place co-op in turmoil over terrace fees

Sutton Place co-op in turmoil over terrace fees
Molly Townsend (Getty, iStock)

Ex-Douglas Elliman sales manager Molly Townsend joins Triplemint

Ex-Douglas Elliman sales manager Molly Townsend joins Triplemint
New home listings in Manhattan are up for the 4th week in a row. Contract signings, not so much. (Getty; iStock)

Manhattan resi listings are up while contracts “limp along”

Manhattan resi listings are up while contracts “limp along”
The process for challenging property assessments is so antiquated, officials won’t do Zoom meetings. (iStock)

“A recipe for disaster”: Fighting property taxes in a pandemic

“A recipe for disaster”: Fighting property taxes in a pandemic
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...